Getting a Fresh Start: Reasons to Choose Chapter 7 Over A Chapter 13 Bankruptcy Filing
Do you want a fresh start? If you are financially drained and seeking to wipe your slate clean, you may want to file for bankruptcy as a last resort. A Chapter 7 bankruptcy filing may give you the needed opportunity to discharge most of your debts. If you meet the qualifications to file bankruptcy and have passed the means test, choosing Chapter 7 over Chapter 13 bankruptcy can offer you numerous advantages.
Four Advantages of Filing a Chapter 7 Bankruptcy
- Quick Debt Discharge
Filing for bankruptcy under Chapter 7 would lead to a court-issued discharge order in about three months, whereas Chapter 13 would require you to pay back a creditor under new terms. A discharged debt eliminates personal liabilities on the part of the debtor. This means that filers of Chapter 7 bankruptcies may expect to be immediately out of debt just by giving up certain properties. The bankruptcy judge will place all their properties in the care of an appointed trustee. Once the trustee has distributed the proceeds from the debtor’s property to his unsecured creditors, the bankruptcy case is considered closed.
However, you must still plan to pay for certain debts that are exempt from being discharged. In a personal bankruptcy case, exemptions apply to student loans (unless proven in court that repaying would lead to undue hardship), child support, alimony, debt payments arising from fraudulent acts, mortgage, federal tax liens, mechanic’s lien, cooperative housing fees, and retirement plans.
- Protection of Future Income
In Chapter 7 bankruptcy cases, all properties acquired after filing shall be excluded from the bankruptcy estate. An exemption to this rule is when debtors acquire any of the following assets within 180 days after they have filed the case: life insurance, death benefits, inheritance, and properties awarded after a divorce settlement. In contrast, your future income and other properties acquired in the future will most likely be included in your debt payments under your court-approved repayment plan.
- No Set Debt Limit
Under bankruptcy laws, a Chapter 7 filing does not have a limit on the amount of debt one can file for. This is in contrast with a Chapter 13 bankruptcy case which has limitations for both secured debts and unsecured debts.
- No Repayment Plans
For individuals declaring bankruptcy under Chapter 7, discharged debts (those that are not part of the exemptions listed above) will no longer have to be repaid, unlike in a Chapter 13 bankruptcy where monthly payments are given to lenders in a three to five year period.
Chapter 7 Bankruptcy Qualifications
Prior to filing bankruptcy and before reaping the four benefits enumerated above, you must first meet the eligibility criteria for Chapter 7 bankruptcy. If your income is sufficient to pay off your creditors, then the court may convert your case into a Chapter 13 bankruptcy filing instead. Moreover, Chapter 7 filers are individuals who are financially incapable of repaying loans. Businesses or Corporations seeking a fresh start must file for another type of bankruptcy.
Meeting the eligibility requirements is only the first step in the bankruptcy process. You will still need to attend credit counseling and work with your bankruptcy attorney to decide which among the different types of bankruptcy fit your case. After bankruptcy, your case will be reflected in your credit report. Although rebuilding your credit score may take years, it is still possible after you declare bankruptcy.
Are you in a financially challenging situation and want information on how to file bankruptcy? Maybe you simply want to determine which properties qualify as exempt and nonexempt. You can get legal advice from WantAFreshStart, LLC.
Our bankruptcy lawyers in Arizona and Nevada are well versed in state laws and experienced in handling bankruptcy filings for both Chapter 7 and 13 bankruptcies. Call WantAFreshStart, LLC now to schedule a free consultation.